SBUX
The hedging haircut
Starbucks is apparently feeling a little less “insurance policy” and a little more “let it ride.” The company has cut back its fixed-price green coffee contracts to under $200 million, down from $1 billion in 2019, even as coffee prices sit near 13-year highs.
Why this matters to your portfolio
For a company that buys about 3% of the world’s coffee, that’s not exactly a casual pantry purchase. Less hedging means Starbucks gets more exposed if bean prices keep climbing — but it also gives the company more flexibility in a fast-moving market.
The trade-off: less cushion, more whiplash
Starbucks is leaning more on “price-to-be-fixed” contracts, which lock in the beans and delivery terms now but leave the final price for later. In other words: fewer seatbelts, more speed.
It does have a cushion, though. Starbucks says its green and roasted coffee inventories are worth about $920 million, which should help absorb some of the shock if spot prices keep bouncing around like a caffeinated ping-pong ball.
Big picture
New CEO Brian Niccol is juggling two expensive headaches at once: volatile coffee costs and a café business that still needs a sales glow-up. If coffee stays hot, Starbucks’ leaner hedging strategy could squeeze margins — but if prices cool off, the company may look pretty smart for not overpaying to lock in beans.
Big picture: Starbucks is betting on agility over armor. That’s fine — until the market decides to throw a chair.